The Buzz: Funds and Outside Markets Still Matter
Maintaining fund position is crucial for prices.
Compiled by staff
Published: Jul 15, 2009
With crops in good shape and no threatening weather on the horizon, rallies may look to non-traditional forces for assistance, according to the Farm Futures marketing team.
Market Analyst Arlan Suderman, speaking on this week's edition of The Buzz, said the influence of commodity funds remains strong. This outside money is still very interested in owning commodities, including food, for a long-term hedge against inflation. Hotter than expected readings this week from the consumer and producer price indexes may only support that type of buying, which has increased in the last month.
Suderman doesn't expect big reductions in position limits for agricultural commodities, as some have called for in Washington. Most of the talk so far focuses on the energy market, where funds typically hold a much larger position.
Senior Editor Bryce Knorr said maintaining the fund position is crucial for prices. Though funds cut back during the near-collapse of the financial markets this year, their overall participation is still much larger than it was before the commodity boom. If funds were to return to the holdings they had at the start of the decade, the price of corn would drop to $2 a bushel, given current supply and demand fundamentals.
To watch the complete program, click HERE.
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